Traffic Exposure and Income Sorting

Abstract

This paper studies the effects of traffic exposure on the income sorting of heterogeneous residents. Exploiting the quasi-experimental setting of the introduction of a new road plan (PVP) implemented in a medium-sized Swiss city (Lugano), I use a structural model for residential location choices to estimate the effect of traffic exposure's changes on housing rental prices, population relocation, and income-based residential segregation. I find that low-income renters migrate to neighborhoods with increased traffic levels, while high-income ones are more likely to cluster in less-trafficked areas. This mechanism is consistent with lower traffic exposure leading to higher housing prices, disproportionately affecting low-income households who spend a higher share of their income on housing. The model framework allows me to build counterfactual simulations; thus, I analyze the impact of a segregation-reductive traffic management policy: the local government can reduce residential segregation by deviating traffic in neighborhoods with a concentration of high-income households.

Keywords: JEL Classification: Q53, R13, R23, R41 traffic, income sorting, relocation, housing prices, residential segregation

JEL Classification: Q53, R13, R23, R41